The path to becoming a Forex trader is relatively well-known. You start by reading a lot of materials about Forex. Then you find a Forex broker online, and then you formulate your own trading strategy. You fine-tune and tweak your strategy while using the demo account so that you will have trading rules and systems in place.
Once you are able to achieve consistent results for 3 to 6 months, then and only then should you start trading in the real world.
But you are only human, and therefore you are likely to commit a few mistakes. We’re not talking about making the wrong calls on your Forex trades, however. We’re talking about challenges that you can actually overcome.
Some Forex traders are so enthusiastic about their “new occupation” that they may have too many trades going on or that they trade too often. What you need to do when you find yourself doing this is to first figure out why you are over-trading.Are you driven by the thought of making huge profits? Then this is your greed talking.Or maybe it’s because you really don’t have an overall trading plan. When you are trading depending on your whim and gut feeling, then sometimes you’ll just go haywire and do a lot of trades.Perhaps it’s because you’re not really sure about what you are doing, and overtrading is your way of compensating. You think you’ll make up for your weakness by doing many trades at the same time.
What you need to do to avoid this is to have a plan, and that includes setting limits on how much you are willing to risk. For instance, you should make sure that no single trade involves more than 2% of your capital, and that all your trades running simultaneously should be only 10% of your account.
Not Trading Enough
This is the opposite to overtrading, and happens when you are unsure about what you are doing. You become afraid of risks, and you may even virtually stop trading. The problem with this is, your fear may prevent you from taking advantage of profitable opportunities.
If placing a trade is like taking an exam, then the best way for you to feel confident is to study. Go back and review your information sources so that you will remember what to do. Then set up a plan on how many trades you should do. You can start slow, but you have to start somewhere.
This problem happens when you realize that there is a veritable library of information online—and then you proceed to read them all before you begin. Another symptom here is when you look at too many graphs while you try to analyze two dozen currency pairs.
What will happen is that you will suffer from data overload, and it will definitely confuse you. It will also tire you out. Often, the result will be that you will place a trade for no good reason at all because you have simply confused yourself.
Inconsistent Trading Methods
Try to find out the strategies other Forex traders recommend, and you’ll find that there are quite a lot of them. In fact, you can actually say that there may be as many different strategies as there are traders, because no two strategies are exactly the same.
One possible consequence of this is that you’ll try out one method for a week, and then when it doesn’t get you the results you want you switch to another method for another week. And this approach can really be a problem.
For one, you won’t gain experience and expertise on a single trading method. And what’s more, you aren’t giving enough time for the method to prove whether or not it works. One week is really not enough. Try 6 months.
If this is your problem, then you have two possible solutions. One, you go back to the drawing board and use the demo to find the method you want. Or, you can remember what you did when you were using the demo before, and you stick to that. After all, you decided to start trading for real because you had attained consistently good results on the demo account.
For some people, Forex trading is similar to gambling, and such perception can lead to a compulsive addiction. You may find yourself thinking about trading all the time, and now it’s starting to affect not just your work but also your family and your social life.
If this is the case, you may want to step back and see a medical professional. There’s a difference between a passing fancy and an addiction, and a health care professional can see which label applies to your case.
But whatever challenge Forex traders face, there is always one way to help overcome it: Make a plan. Plan using logic and reason, and then find the willpower and commitment to stick to it.